Tuesday, October 12, 2010

Picking up the count where prices left off in Monday's update, wave iv of ending diagonal (v) should be complete with the majority if not all of v following.

Wave v has already reached the upper i-iii line and is likely in the process of throwing over that line if it has not already completed doing so. A throw-over is a typical move for the 5th wave of ending diagonals. There may be a small move higher tomorrow, not more than a few points, to complete a single or double zigzag beginning at the morning low.

The Dow 30 is in a better position for a top when considering the selling just before the close. Given this, perhaps the best count for both indices is a complete double zigzag wave v with 5 of (C) of [Y] truncated.

Even if v is complete a noticeable gap down is not expected tomorrow, especially one that will not be filled soon after the open. In fact a gap higher (of only a few points of course) would actually better support the count so the decline is not initiated with a breakaway gap. Most breakaway gaps are moves within a correction (look at the 1/20/10 8/11/10 downward gaps for instance; these were both following ending diagonals as well).

Because wave (iii) was shorter than wave (i), there is a strict limitation for the length of wave (v). This number is 1176 but can be extended to 1180 with a modified wave (iii) top.

(v) is very well formed at this point and can clearly be counted as a complete or nearly complete ending diagonal. Even if the short term labellings are not correct, an ending diagonal since 9/23 is a high probability.

Wave (v) should complete impulse wave [c] of flat wave 2. As mentioned in earlier updates, [c] works very well as the final leg of a flat. Even if wave 2 is actually a 'b' or 'x' wave, prices should still break below 1000.

For those interested, there is a great interview with Robert Prechter on this page from last week. I agree with the points he presents.

Picking up the count where prices left off in Monday's update, wave iv of ending diagonal (v) should be complete with the majority if not all of v following.

Wave v has already reached the upper i-iii line and is likely in the process of throwing over that line if it has not already completed doing so. A throw-over is a typical move for the 5th wave of ending diagonals. There may be a small move higher tomorrow, not more than a few points, to complete a single or double zigzag beginning at the morning low.

The Dow 30 is in a better position for a top when considering the selling just before the close. Given this, perhaps the best count for both indices is a complete double zigzag wave v with 5 of (C) of [Y] truncated.

Even if v is complete a noticeable gap down is not expected tomorrow, especially one that will not be filled soon after the open. In fact a gap higher (of only a few points of course) would actually better support the count so the decline is not initiated with a breakaway gap. Most breakaway gaps are moves within a correction (look at the 1/20/10 8/11/10 downward gaps for instance; these were both following ending diagonals as well).

Because wave (iii) was shorter than wave (i), there is a strict limitation for the length of wave (v). This number is 1176 but can be extended to 1180 with a modified wave (iii) top.

(v) is very well formed at this point and can clearly be counted as a complete or nearly complete ending diagonal. Even if the short term labellings are not correct, an ending diagonal since 9/23 is a high probability.

Wave (v) should complete impulse wave [c] of flat wave 2. As mentioned in earlier updates, [c] works very well as the final leg of a flat. Even if wave 2 is actually a 'b' or 'x' wave, prices should still break below 1000.

For those interested, there is a great interview with Robert Prechter on this page from last week. I agree with the points he presents.

My trading philosophy is 95% based on my own Elliott Wave analysis of the S&P 500. I try to keep my analysis and trading as simple as possible and do not use trend lines, channels, or definite retracement, price, or time targets. To me, inspecting the proportionality and symmetry of a market's price structure is the key to mastering the principle; it is through this that low-risk, high-reward trading opportunities are found.

Because they are the only things I look at when trading, the quality of the charts I post on this blog are very important to me. I think you will find my work to be the best Elliott Wave analysis of the S&P 500 on the internet.